Public Bill Committee

[Mr. Christopher Chope in the Chair]

Christopher Chope: Before we begin, I have a few preliminary announcements. Hon. Members may take off their jackets during Committee meetings, if they wish to do so. Hon. Members should please ensure that all electronic devices are switched off throughout our proceedings. There is a money resolution and a Ways and Means resolution in connection with the Bill, and both are available in the Room.
First, the Committee will consider the programme motion on the amendment paper, for which debate is limited to half an hour. We will then proceed to a motion to report written evidence, and then to a motion to permit the Committee to deliberate in private in advance of the oral evidence sessions. Assuming that the second motion is agreed, the Committee will move into private session. Once the Committee has deliberated, the witnesses and members of the public will be invited back into the room and our oral evidence session will commence.
I am afraid that members of the public who are present will be disrupted at the beginning, but I hope that it will not be too long before they can come back in and hear the oral evidence session. We will hear oral evidence this morning and this afternoon. On Thursday we will proceed to clause by clause scrutiny of the Bill.

Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 10.30 a.m. on Tuesday 17th July) meet—
(a) at 4.00 p.m. on Tuesday 17th July;
(b) at 9.10 a.m. and 1.30 p.m. on Thursday 19th July;
(c) at 10.30 a.m. and 4.00 p.m. on Tuesday 24th July;
(d) at 10.30 a.m. and 4.00 p.m. on Tuesday 9th October;
(e) at 9.10 a.m. and 1.30 p.m. on Thursday 11th October;
(f) at 10.30 a.m. and 4.00 p.m. on Tuesday 16th October;
(2) the Committee shall hear oral evidence in accordance with the following table:
TABLE

Date

Time

Witness
Tuesday 17th July
Until no later than 1.00 p.m.
Department for Work and Pensions
Tuesday 17th July
Until no later than 5.30 p.m.
Professor Nick Wikeley, John Wilson Chair in Law, University of Southampton
Tuesday 17th July
Until no later than 7.00 p.m.
Janet Allbeson, One Parent Families
(3) the proceedings shall be taken in the following order: Clause 1; Schedule 1; Clauses 2 to 12; Schedules 2 and 3; Clauses 13 to 16; Schedule 4; Clauses 17 and 18; Schedule 5; Clauses 19 to 39; Schedule 6; Clauses 40 to 52; Schedule 7; Clause 53; Schedule 8; Clauses 54 to 58; new Clauses; new Schedules; remaining proceedings on the Bill;
(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 10.00 p.m. on Tuesday 16th October.—[Mr. Plaskitt.]

Ordered,
That, subject to the discretion of the Chairman, any written evidence received by the Committee shall be reported to the House for publication.—[Mr. Plaskitt.]

Ordered,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—[Mr. Plaskitt.]

The Committee deliberated in private.

On resuming—

Christopher Chope: We will now hear oral evidence from representatives of the Department for Work and Pensions. I welcome the witnesses and ask them to introduce themselves, starting with the Ministers.

Lord McKenzie:   My name is Lord McKenzie of Luton. I am the Minister with responsibility for the Child Support Agency.

Mr. Plaskitt:   I am James Plaskitt, a Minister in the Department for Work and Pensions and the Bill Minister.

Hilary Reynolds:   I am Hilary Reynolds, the programme director for child maintenance redesign.

Stephen Geraghty:   I am Stephen Geraghty, the chief executive of the Child Support Agency.

Christopher Chope: I remind hon. Members and witnesses that we are bound by the internal knives agreed in the programme motion. The first evidence session must therefore end at 1 o’clock at the latest. The second must end at 5.30 pm at the latest and the third no later than 7 pm. I hope that I do not have to interrupt hon. Members or witnesses in the middle of their sentences, but if that is required by the decision of the Committee on the programme motion, that is what I shall do. Before the first question, I remind hon. Members that questions should be limited to the provisions of the Bill.

Q 1

Andrew Selous: I start by asking the Ministers why we do not have draft regulations, unlike the Welfare Reform Bill? We have a Prime Minister committed to a new environment of open parliamentary scrutiny, but we are considering the broad architecture with very few details laid out.
Given the previous difficulties that the CSA has had—hon. Members on both sides of the House are extremely worried about this—why was the Bill not brought forward at the same time as the regulations so that we could have scrutiny leading to possible amendment? That will not be possible when the draft regulations come in. When the regulations come in by statutory instrument, they can be only accepted or rejected.

James Plaskitt: May I try to help in answering that? It is sensible to approach the regulations in different categories. First, much of the Bill is framework architecture for work that the Child Maintenance and Enforcement Commission will do subsequently. It is important to stress that we are moving from an agency model to a commission model. It is right, in many respects, to allow the commission to devise its own systems. Therefore, it is right and proper that the commission be established first and then for it to think how it wants to proceed in respect of various areas—some of those things will eventually emerge via regulation. Logically, the regulations will not come forward until the commission has done that work. Examples of operational regulations that need to await Royal Assent and the establishment of the commission are those that relate to fees, maintenance assessments, and the transfer of cases.
However, I may help the Committee by pointing out that other regulations will relate more to the setting up of the new system, and they will come forward sooner. For example, regulations relating to CMEC as a legal entity, the extension of the £10 disregard to old cases, the repeal of section 6 of the 1991 Act—that is the compulsory engagement of benefit recipients into the system—and the new enforcement powers will come forward earlier. We suspect that that will take place in the spring of 2008.
There is a third category where we hope to bring forward draft regulations during the procedure of line-by-line scrutiny in Committee. For example, those draft regulations that can be proceeded with in a timely fashion relate to clauses 29 to 31, which cover debt management, clause 34, which covers the recovery of arrears from estates, and clause 35, which deals with the disclosure of information to credit reference agencies. I expect draft regulations on those clauses to come before the Committee. In respect of those for which we cannot put draft regulations before the Committee, we will produce a dossier for it to consider, which will provide an explanation about regulations that are still forthcoming.

Q 2

Andrew Selous: I have a brief supplementary question. Why is CMEC being set up as a non-departmental public body rather than an executive Government agency? Surely the past 10 years tell us that parliamentary scrutiny will become much more important. Many people have put it to me that only an MP’s letter has made the CSA jump to try to sort out often intractable cases. As a non-departmental public body, it will be much more at arm’s length, and a number of hon. Members on both sides of the House are concerned about our ability to scrutinise, to hold Ministers to account and to get answers from CMEC.

Lord McKenzie:   Perhaps I may answer that question. It is very important that the body is more at arm’s length, and that we do, indeed, have a clear break from the current situation. A key part of Sir David Henshaw’s analysis is that we need to change operational matters as well as the policy framework. Having a non-departmental public body with separate governance arrangements and with greater operational flexibility is a key part of the reforms. It is needed to distance the future from the legacy of current and past failure and the culture of non-compliance.

Q 3

Andrew Selous: What stops an executive agency from having operational flexibility?

Lord McKenzie:   It is more difficult. A key part of the non-departmental public body is that it is has a non-executive board to lead the strategy and focus of the operation. That is much more difficult to do under an agency arrangement. There will be operational flexibility, which will allow the commissioning of the range of services that CMEC needs. Parliamentary scrutiny is still available. The NDPB will have to report on an annual basis, and the report will deal not only with its accounts, but with the extent to which it has contracted out its services. There will still be accountability through Ministers. There are processes for the new commission to be held fully to account through Select Committees and other routes. I do not believe that the engagement of MPs in that process will change substantially. We want to ensure that those links are strong and enshrined in the new arrangements, particularly with regard to the ability to follow up individual casework.

Q 4

Michael Weir: When the Minister was talking about regulations, he did not mention minutes of agreement. They have been welcomed throughout the House, but there is a painful lack of detail about how they will work. Will he introduce regulations covering such matters as whether the agreements have to be in writing, whether there will be a register and whether there will be any quality control of the nature of voluntary agreements?

Lord McKenzie:   The issue of whether there should be a register of agreements is something that we want the commission to determine in due course. It might wish to arrange pilots to enable it to make that decision. There are arguments both ways about a register of voluntary agreements, and there are practical issues concerning the extent to which it could be kept up to date and the resources that the commission would have to deploy in keeping it current. I think that minutes of agreement are the Scottish equivalent of consent orders, and they will proceed on their current basis. The one key change will be that, once the section 6 compulsion goes, a claim for benefits by one or other of the participants will not break the agreement. It will continue, subject to the 12-month rule, under which either party can elect to come out of the agreement.

Q 5

Michael Weir: But is it not important that the regulations concerning how people go about making a consent order, or minute of agreement, are in place at an early stage? I am bit concerned that there does not seem to be any proposal to bring forward such regulations until a fairly late stage, when the commission is up and running.

Lord McKenzie:   The information and support service will be an important component. It is important that that is up and running robustly by the time the section 6 compulsion goes. As you would expect, the role of that service is to encourage and help to facilitate voluntary agreements, as well as to help people access the statutory service. That will be in place at an early stage, by the time the section 6 compulsion goes. That resource will be there to help and guide people. The full range of information and support that will be given has not yet been fully worked out, but we would expect a standard maintenance agreement to be on offer, which people can use to put in place voluntary arrangements. That support will be there.

Q 6

Tim Boswell: I have two questions, although the first is perhaps more of an observation. It is interesting that another Department has recently introduced lasting powers of attorney, which are registerable before operation. Given that there is bound to be an interaction with the total income levels of participants in the process, it might be relevant to consider that.
My question relates to the assurances about accountability that the Minister has given us. I understand his arguments, particularly for operational flexibility and even for a degree of discretion. Against that, one has to weigh the need to ensure that what is prescribed in the law is carried out, that practice is consistent between different cases and that discretion is effected in a reasonably principled way. Will the Minister assure us, first, that if we have individual casework, in practical terms we will be able to pursue the matter in almost exactly the same way and, secondly, that if we have what might be termed systemic concerns about the way in which CMEC is to operate, we can at least raise them rather than waiting for the off-chance of an annual report debate in Westminster Hall or elsewhere?

Lord McKenzie:   Yes, I believe that I can give an assurance on each of those points. Stephen may want to amplify on the first, but it is clearly important that there is an ongoing route for dealing with casework, and that there is no intent to change or diminish access and the opportunities that currently exist.
So far as concerns with systemic problems that are perceived as CMEC gets up and running, there are clearly a variety of routes to raise—for instance, through the Secretary of State and the Minister with that particular responsibility. It will bubble up to the surface in a variety of ways, and it will be clear to all and subject to appropriate challenge and scrutiny in Parliament. Do you want to say anything, Stephen?

Stephen Geraghty:   I agree with you, Lord McKenzie. It would be remiss of CMEC and unwise for it not to take seriously the involvement of Members of Parliament in their constituents’ cases, just as the agency has put in place mechanisms to do it now. It would be bizarre if it did not.

Q 7

Sarah McCarthy-Fry: We heard Lord McKenzie use the phrase “clean break”, which has been used many times and especially on Second Reading, and we heard a great deal from witnesses about structural change. Miss Reynolds, will parents notice a clean break, or will they think of it as the CSA by another name?

Hilary Reynolds:   Once CMEC is established under the Bill, it will take responsibility from the Child Support Agency for all the clients on both existing schemes. Those people will start to see a difference in October 2008 or thereabouts, when we introduce the repeal of section 6. If they are on benefit they will start to be given a choice. They will have the possibility of experiencing the information support service in 2008, subject to the passage of the Bill. Thereafter, those who wish to move to a voluntary arrangement or to the new statutory scheme set out in the Bill will start receiving communications about their options and the support mechanisms.
That will happen between 2008 and 2010, when, as set out in the White Paper, we expect the commission to be ready to move people to where they want to go. On an individual basis, people will be asking how much money they will get and whether it will be paid. They will not see anything happening immediately, but from October onwards, subject to detailed planning, they will start to see changes that could affect them should they choose to take them as the new regulatory scheme and information support come into play.

Lord McKenzie:   May I just add one other change? It will be the extension of the £10 disregard to the old scheme cases, which would be an early part of the scheme.

Q 8

Sarah McCarthy-Fry: Could all that have happened within the CSA, or do you feel that it needs a completely new structure?

Lord McKenzie:   I believe that it does. It is an important point. It is not only a change of structure and governance arrangements; the remit of the commission is to maximise the number of effective maintenance arrangements, be they voluntary or made through the statutory service. That broad remit to maximise maintenance arrangements is given for reasons that I am sure will be familiar—tackling child poverty and getting more money to more children. It will also have a remit to promote child maintenance and to create an awareness among the public about the importance of such matters. That will be a key part of its remit.
It is right that these things should be bundled together, along with the new assessment and the change in relation to the disregard, into a new entity, in order to establish a break with the past. Despite the hard work of lots of people, there is no doubt that although the CSA is improving under the operational improvement plan it is not delivering what we would expect of it. That legacy is going to be very difficult to shake off, but it is important that we do it. Breaking the culture of non-compliance is certainly important, and I think that a new commission with new enforcement powers will be a key part of that.

Q 9

Desmond Turner: CMEC is going to be responsible for information and guidance, collection and enforcement and, although this is not spelt out, for the assessment of maintenance too. That does not sound so very different from the CSA in its present form. A potential issue arises here. As Mr. Selous pointed out, this is a non-governmental body rather than an Executive agency. At least there is a degree of clarity at the moment. When the CSA makes a mistake, or is held to make a mistake, which has filled several filing cabinets in my office over the years, we have recourse to the appeals tribunal and the social security commissioner and it is fairly clear. This would be the first example that I know of—there may be others—of a non-governmental body being open to the workings of the appeals tribunal and the social security commissioner. I seek total clarity from the point of view not only of claimants, but of Members of Parliament who may get called upon to help them out.

Hilary Reynolds:   There will be a range of appeal routes, just as now, from decisions made by the non-departmental public body. We can certainly supply a clarification note for you on what decisions lead to which first and second-tier appeal routes. We do not plan to remove any current appeal routes at all.

Q 10

Desmond Turner: Okay, but can you also give clarity about advice and guidance that will be offered between the third and private sectors? How will that relate to CMEC?

Mr. Plaskitt:   This is about the information and support services?

Desmond Turner: Yes.

Mr. Plaskitt:   Obviously this is an important new part of the scheme and it is another part of the clean break from what has gone before. One of the drivers here is to try to encourage separating couples to come to their own voluntary arrangements wherever possible. After all, such arrangements have a higher chance of sticking than ones that are forced through a system. As part and parcel of moving to a system that facilitates more voluntary arrangements, it is right and proper to offer advice and support services to help couples to come to the right decisions about what arrangements they are going to make for child maintenance.
It is up to CMEC to develop those services and there will be a key role for third and voluntary sectors in providing those services. After all, it will be very close to many types of advice and support that those organisations are giving already. It will be a natural fit in that sense. We must also think about where parents will turn to instinctively when they are unfortunately embarking on a separation. This advice and support service needs to be parked in exactly the places that they will turn to so that they do not have to think about where to find it. It needs to be there at the point to which they instinctively turn.
That is how we see these services evolving. They will have many dimensions to them. Potentially there will be face-to-face advice for couples who are finding it a struggle to reach a voluntary arrangement. Behind that there will be more passive advice in the form of a website and a contact centre which parents can call to get over-the-phone advice about setting up their own voluntary arrangements. It will be multidimensional, but largely for the commission to determine in the end how it will operate.

Q 11

Desmond Turner: So, for instance, couples might turn to a body like the citizens advice bureau and expect some advice. What arrangements would you set in place to ensure the competence of that advice?

Mr. Plaskitt:   It is important to stress that what we envisage setting up is a stand-alone specialist service, primarily contacted through a call centre. It will have its own unique identity, its own dedicated staff, highly trained in providing that service, and organisations such as CAB and others will be able to signpost people towards that service. They will say to separating couples who want help and advice on how to come to a voluntary arrangement that there is this body with a freephone number that can help them. We are not going to ask all the other agencies to be the only centres of specialisation; we envisage setting up back-up behind them.

Q 12

Tim Boswell: On the reassurances that we were given, and the offer of a note on the appeals process, could we also have a comment on the potential—one hopes that it will not happen—for a judicial review on points of law, as it applies in this case, as the law will be changing.
On the issue of the service, I may not have focused on it as much as others might have done, but I take it from what has been said that there is no question of there being, for example, a local tendering whereby a non-governmental organisation might take over offering the service locally rather than simply having an impersonal helpline. I appreciate that it will help people, but would there be the possibility of face-to-face meetings where people could get local advice as well as distant advice, if they prefer that route.

Lord McKenzie:   There is a tendering process, which is beginning to start, with respect to the service generally. Hilary may want to update us more specifically on that. In relation to the face-to-face component of it, and possibly the opportunity of outreach services, those services do not exist at the moment and will have to be built. It may be possible within that framework for there to be local providers as part of that overall arrangement.

Q 13

Andrew Selous: Could I seek some clarity on what rough proportion of the advice service will be provided by CMEC, and what by voluntary and private organisations? I ask the same question in terms of the funding of that advice.

Lord McKenzie:   In relation to the funding of advice, we are currently going through tendering processes, so we ought to keep confidential the scope of the funding. We see the core service—the contact centre, the website, the provision of leaflets—as being contracted out to the private sector and the voluntary sector. Clearly, CMEC itself will have a role in disseminating some of that information, but we see the core of it being commissioned.

Hilary Reynolds:   It is probably useful to say that the legislation gives the commission the responsibility to ensure the provision, whether it is directly delivered or commissioned from elsewhere.

Q 14

Michael Weir: Just on the point that I made earlier, if we are doing a system over the telephone, with, as Lord Mackenzie mentioned, a standard minute of agreement available over the internet, will there be any quality control over the nature of agreements entered into? Worries have been raised by some that, for example, women could find themselves under pressure to agree a minute of agreement that may not be in their best interests.

Lord McKenzie:   It would be a part of any agreement that we enter into that there is proper monitoring, reporting and evaluation of the outcomes of those agreements. The point that you raise is very important; we need to ensure that in encouraging people to enter into voluntary agreements, which we believe have generally proven to be more sustainable and better for parents, we do not force people into unacceptable and inappropriate agreements. The obligations imposed on people who are delivering the service will be clear in that respect. We will need to build monitoring arrangements into those contracts.

Q 15

Paul Rowen: I am interested in what you say about how this is going to be a clean break. One of the current issues with the Child Support Agency is the fact that when people use the phone, they are dealing with umpteen different people. They never actually get a case officer who is dealing with their particular case. What steps are you going to take to ensure that there is some consistency and that people have somebody who is directly responsible for dealing with their particular case?

Stephen Geraghty:   The CSA is currently moving to having groups of people, not always individuals, dealing with particular cases. To do that, we need to make changes to the computer system, which we will have done by the end of the year. Particularly complex cases, complaint cases and cases where we take legal action already have an individual owner.
By the end of the year, we will have groups of about 20 to 30 people who have a case holding between them. Having an individual case officer for every case does not work because our people work, on average, only about a third of the time that the CSA is open. A person could not ring the agency and expect to speak to the same person; we are open 68 hours a week, but our people do not work all of those hours. Therefore, some sort of group arrangement is needed.
I envisage that the Child Maintenance and Enforcement Commission would build on that start and be able to take forward, wherever possible, individual case responsibility, which is very popular with clients. Indeed, those who work in the CSA would prefer to be able to see the good that they do in the cases that they handle.

Q 16

Nadine Dorries: I want to go back to the point made earlier about pressure and the online agreement. If there are no individual case workers and no named personal key worker that a woman can talk to, what process is in place to eliminate the pressure and obligation that she may feel under to accept the agreement?

Lord McKenzie:   We envisage that there will be both a face-to-face and an outreach component of that service, so there will be opportunities for that. We should, however, be clear that the information and support service should be there to ensure that people are properly supported to understand fully the consequences of the arrangements that they are contemplating entering. Therefore, part of the service should be support when there is a risk that someone is being forced into a voluntary agreement that is not in their best interests.

Q 17

Nadine Dorries: I understand the point that you are making about the outreach and support services, but experience shows that, in such circumstances, case workers tend to read out a tick list. It is almost a process of saying, “Have we informed you of this? Have we informed you of that?” If a particular case worker will not be involved with the same client the next day or the following week, there is not the same obligation to carry out the process, either in person or on the telephone, as effectively as if the caseworker were to deal with the same person on an ongoing basis.

Lord McKenzie:   I should stress that we are still in the process of designing and building the service; it does not exist at the moment.

Hilary Reynolds:   We are trying to think about the new service to ensure that it will enable CMEC to meet its statutory objectives, and we are talking to both clients and the voluntary and third sectors about the design. Therefore, in a telephone survey that we have just completed, we have been asking clients how they would like to access such a service, what sort of information they might find useful and from where they might find it easiest to get it. We are asking the voluntary and third sectors what sort of scope and specialisms they might have, so that the information service is designed from the client’s point of view, not from what we believe might be true. It is clear already that the survey data varies according to whether the separated parent is a parent with care or a non-resident parent. They seem to be attracted to different access channels and types of information.

Q 18

Nadine Dorries: Is priority given to the parent who has the child—the parent with care—and would the information that you are getting back from that particular group take precedence over information from the group who do not have care?

Hilary Reynolds:   The objective of the commission is to maximise the maintenance arrangements, and that involves both parents. When planning information and support, we have to think about how the child can best be supported, and that is by providing information for both parents. Parents with care are an important part of that.

Q 19

Albert Owen: Lord McKenzie, you mentioned that you did not envisage the role of MPs changing significantly from that which they have for the current system. Do you envisage that there will be a MPs’ hotline—or a lukewarm line for some cases—and, if so, will the MPs have the same caseworker so that there is that continuity?

Lord McKenzie:   I defer to Stephen again on this matter, other than to say that in general terms we do not see any of the changes diminishing the access that MPs are entitled to have on behalf of their constituents.

Q 20

Albert Owen: But you accept that the MP is often the first port of call for advice, rather than people going to the different agencies, which can be confusing. The direct contact and the hotline are therefore very important.

Lord McKenzie:   Indeed. It seems to me that we ought to ensure that the ability of MPs to interface with the information and the support services available to them is built in. I think that Stephen touched earlier on how the operation improvement plan is reorganising how cases are handled. Do you want to add anything to that?

Stephen Geraghty:   Only that the detail of what we are talking about will be for CMEC to determine and the commissioner would take a view on such things. It would be unwise and surprising if he or she decided not to provide at least as good a service to MPs as the CSA has offered. Clearly you have mixed experiences and views on that level of service, given the early problems that have been acknowledged.

Q 21

Albert Owen: I must emphasise the lack of continuity. Sometimes the CSA cannot bring up the information for a long time on the MPs’ hotline. One of the problems is that we cannot get the information quickly.

Stephen Geraghty:   I could make all sorts of excuses, but I realise that that is a problem and as we improve the computer system—which we are doing steadily and we have a major upgrade this year—it should improve.

Q 22

Tim Boswell: Turning back to the advice and guidance service—I assure you that I am not looking for trouble, but things will occasionally go wrong—who will carry the legal responsibility or will be suable in a case of misguided advice to a party who accesses the commission? Will it be the commission or its contractors? What steps will be available to establish some kind of audit trail as to what kind of advice had been tendered, because that is the subject of argument in social security cases for our constituents?

Lord McKenzie:   The overall responsibility rests with CMEC. As Hilary said earlier, it will have the legal responsibility to deliver the service. If there is a breakdown in service and difficulties arise, we will need to analyse the particular circumstances of the case to see who is at fault, but CMEC has the responsibility to deliver the service.

Q 23

Andrew Selous: On a broader issue of financial scrutiny, I understand that there is the ability, with an Executive agency such as the CSA, to ask parliamentary questions to get data. Will that be the case with CMEC as a non-departmental public body?

Mr. Plaskitt:   Yes.

Andrew Selous: Excellent.

Mr. Plaskitt:   As is the case with other non-departmental bodies.

Q 24

Desmond Turner: The Bill makes provision for charging for services. Do you propose to do that for CMEC immediately or wait until it has established some sort of a reputation for effective and efficient service—in other words, when it has advanced itself beyond the public view of the CSA? Will there be charges directly or will it wait?

Lord McKenzie:   No decision has been made on charging yet. Before it is introduced, the Secretary of State will lay regulations and do so on the advice of the commission. There is quite a lot of hard thinking and work to be done before we get to the stage of introducing charging. Whatever those arrangements are, they must not force people—particularly low-income families—out of the system and prevent them from entering into proper and effective maintenance agreements. Before any regulations are laid, people must be comfortable that the situation is working as we envisage it will and must believe that it will continue to do so.

Desmond Turner: The system will begin without charges then.

Hilary Reynolds:   In the White Paper, we said that we thought it highly unlikely that charging would start before 2010, when the new statutory scheme is planned to begin, but the Bill will give us the power to make provisions for charging.

Q 25

Desmond Turner: What is your thinking on the level of charges? For instance, do you contemplate setting the charges at a fairly steep level to encourage people into private agreements and thus avoid charges?

Lord McKenzie:   Clearly we would wish people to be incentivised to use private agreements if appropriate, but no decisions have been taken and no detailed work has been done that I am aware of on the broad thrust and basis of charging. That work has yet to be done.

Q 26

Desmond Turner: Sir David Henshaw argued that if we were to levy charges we should charge not only the absent parent but the parent with care. Is that fair, or do you think it could be an undue burden on the parent with care?

Lord McKenzie:   We would need to be careful to ensure that if there was charging on parents with care it would not be an undue burden. We also need to recognise that there could be circumstances in which the non-resident parent was perfectly happy and willing to enter into a voluntary arrangement that may have been forced through by the commission—perhaps unnecessarily. There may be a case for charging the parent with care, but I stress that this work and thinking needs to be developed. We are not there yet.

Q 27

Desmond Turner: It comes back to the intention and purpose of charging. If the fairly considerable cost of operating the CSA is a measure of the costs that will be involved in running CMEC, and if you were seeking to recover some of those administrative costs, the implication is that charges would be pretty high. What is the thinking behind it? Why charge at all?

Lord McKenzie:   The thinking behind charging is to do what we can to encourage and incentivise people to enter voluntarily into appropriate and effective maintenance arrangements if suitable—and therefore, I suppose, not to use the system unnecessarily if it can be avoided and if it is not appropriate. We do not envisage that charging will necessarily be set to recover costs, or that it will be based on that sort of calculation.

Desmond Turner: It is a carrot and stick approach.

Lord McKenzie:   Yes.

Hilary Reynolds:   And clause 6(3) explicitly provides that it is not necessarily a cost recovery thing.

Q 28

Michael Weir: You mentioned earlier the contracting out of information guidance services, but the Bill also gives the power to contract out other services. What proportion of other services you envisage being contracted out?

Lord McKenzie:   No decision has been taken; it would be very much an issue for the commission once it is up and running. The Bill provides for any part of the service to be contracted out, but the commission will make those decisions in due course and over time.

Q 29

Michael Weir: Do you see the core services of maintenance calculation and collection as candidates for being contracted out?

Lord McKenzie:   I do not think that they are precluded, but that is not the same as saying that it will happen. It is very much part of the new body’s remit that it should make its own judgments about delivering efficient and effective services, and that can be done in a variety of ways. Stephen, do you wish to comment?

Stephen Geraghty:   The power exists for the current agency to contract out pretty much anything. That is a relatively recent power. We have contracted out things for which we do not have capacity, when the problem was the overall capacity of the agency generally. However, specialist trace-work for finding some non-resident parents has been contracted out to people who are better equipped. Looking around the world, 2 or 3 per cent. of the enforcement is contracted out in the USA. Some counties in Virginia and some judicial districts in Tennessee have contracted out completely, and their performance is similar to those that are still run in-house, which is why it has not taken off as a broader movement in America. It is something that the commission would consider, but only if it was likely to be effective in the individual circumstances, given the commission’s capacity and how efficiently each part was running.

Q 30

Michael Weir: CMEC has one fundamental difference from the CSA, which is that the calculation is based on information obtained from Revenue and Customs. I just wonder, in these circumstances, whether contracting out maintenance calculations should even be considered.

Lord McKenzie:   Yes, that is a good point. The gateways that will be available will enable that information to come to CMEC. As for the extent to which those gateways would be open onwards, perhaps Hilary can respond.

Hilary Reynolds:   One of the schedules lays out all the information gateways that will be available. Those are fairly wide gateways to allow CMEC to have the facility to take and receive information from a wide variety of sources. There is a specific clause about use of information, and a whole schedule laying out the various gateways.

Q 31

Andrew Selous: I want to ask about the scope of CMEC. This is perhaps an opportunity to set a slightly different direction in terms of the objectives of what we do. Mr. Geraghty talked about one or two things that happen in America, for example. If you look at the Australian Child Support Agency, one thing that it is much better at, and which frankly the CSA has never done here, is trying to deal with the human side of break-up and to ensure that the ongoing emotional support, as well as the financial support, for children carries on from both parents going forward.
I had a look at the Australian CSA’s website yesterday evening, and on the front page it says “Support for Separated Parents”. You can download these excellent documents. I do not know if you have seen them. One is “Me and my kids: parenting from a distance”; the other is “Me, my kids and my ex”. They are full of incredibly practical help, information and support to try to make life better for children. That is what we are talking about: the money plus a better situation in terms of parental involvement, where it is safe, from both parents going forward.
The CSA has never really done the human side of what we are talking about. My contention—my argument to you—is that if you get the human side right, by which I mean the emotional support, that could not be a better aid in helping us all achieve what we are seeking, which is a regular, reliable supply of financial information.
This is a new opportunity. The Bill is before us, and I am really asking you to look very carefully at what the Australian CSA did. It may be that you do not want to provide it as CMEC because of some of the past history, but in terms of the purchaser-provider split, are you going to ensure that some of this help and support is provided, which other CSAs around the world in societies pretty similar to our own are providing? I urge you most strongly to look at that as a way of helping us to achieve what we are all trying to achieve.

Stephen Geraghty:   The initiative that you describe, and the change of the strapline of the Australian agency to “Supporting Separated Families”, is something that we are aware of. It is something new for them too. It is in the last six months or so that they have adopted that line.

Q 32

Andrew Selous: With respect, I went there with the Select Committee in the middle of the last Parliament. There was plenty on it then. I brought back this biro saying “Staying connected”. It was actually doing that then, but no doubt it has done more since.

Stephen Geraghty:   I think you looked then at a plan for some family relationship centres, which are now open. It has opened 50 now, with another 15 or so to go. The information and support services are a step in that direction. There are different theories about, and different political dimensions to, the matter—whether it is about dead-beat dads or about supporting the family. The Australians have very clearly come to the conclusion that it is about supporting the family, and we are making a move in the same direction, through information and support. The sort of questions that we had on charging, and where that goes, will also reflect an attitude of where we place ourselves on that spectrum.

Q 33

Andrew Selous: There has been a lot of talk about changing the culture. That phrase comes out in the White Paper, and it was used on Second Reading. Do not any of you see this sort of initiative in Australia as a key part of changing the culture and going forward, and not just viewing the non-resident parent as the provider of cash? That would be a help towards the aim of ensuring a steady, reliable source of financial maintenance.

Lord McKenzie:   That is a hugely important point. In its early stages, the information and support service will be primarily focused on issues of maintenance. Again, the point you make about arrangements that are entered into voluntarily and consensually rather than fought out acrimoniously is absolutely right. Any support that can be given to move in that direction has to be right. We see the information and support service initially as perhaps signposting other available services. This is a step along the way to building a more holistic service.

Hilary Reynolds:   We have been working quite closely with CSA Australia. We have various copies of things. I spent some time there in a family relationship centre to learn how it set it up, what difficulties it had, how many people it helps, at what cost and to what sustained outcomes. The more we can learn, the more likely we are to set up something here with CMEC that works for the children.

Q 34

Andrew Selous: May I take it from Lord McKenzie’s answer that there is at least a commitment to signpost where this type of support and help can be found for separated parents? I am not asking you to make a budgetary commitment, but if it is not out there the implication is that we will have to do some capacity building so that it can be provided.

Lord McKenzie:   It is certainly something that we are aiming to design into the service.

Andrew Selous: Excellent.

Q 35

Tim Boswell: I want to ask a couple of questions about the transfer of staff in a moment. First, may I just comment on some exchanges earlier with Mr. Weir about information and point to one of the underlying concerns? I assume CMEC will have the information, but I hope it will not abuse it by allowing it to leak out further. We know how sensitive the Revenue is on this and, indeed, how sensitive our constituents are.
My questions relate to the new structure of employees when the commission comes into force. Could you give us an idea of the percentage of current CSA staff who will be required by CMEC and the fate, if I may put it that way, of the transfer? There will be some who will come across, and I take it that they will be covered by Transfer of Undertakings (Protection of Employment) Regulations 1981 in relation to their entitlements. Some may be made redundant and, equally, there will be some new recruits who may have different and more appropriate skills for the mix. Could you comment on that general picture? Can I also ask you about training for the new commission? It seems that not enough was initially invested in the CSA. There are still difficulties with people understanding what are very complicated formulae. That all feeds into morale and the likely attitude of staff to the new organisation.

Lord McKenzie:   Under the Bill, at the point that functions transfer from the CSA to CMEC, there will be a TUPE transfer of all staff. There is provision for the Secretary of State to carve out some people who will not, which is envisaged to be some contractors who may be working at that stage. So everybody moves in at that stage with the opportunity of remaining in the civil service pension scheme, too, and with the prospect of vacancies arising in the Department being available to them as if they had not transferred. Those are quite important protections.
In relation to head count, Stephen may wish to comment in more detail. Obviously, as we are expecting a lower level of use of the commission than is currently part of the CSA’s casework, and with improvements to IT systems, fewer staff will be required eventually than will be needed at the start of the process.
You asked about training. Clearly, with potentially new or enhanced bases of assessment and new responsibilities relating to ensuring effective maintenance arrangements generally, training for staff will need to be properly provided for. Stephen or Hilary might be able to comment on the extent to which we are developing that.

Mr. Plaskitt:   Before Stephen comes in, I should like to pick up on your comment about morale, because it is an important matter. Bill and I, along with other Ministers in the Department for Work and Pensions, have done a series of visits to the large CSA offices around the country, to discuss the reform process with staff. On those visits, we have always found that staff morale in the agency in surprisingly high. I say surprisingly because of all the criticism they receive, most of which is inappropriately directed. We have all tried to stress that issues of systemic failure in the agency are not the fault of its staff, because they have to work with a broken system. The reason for such high morale is the interest in this reform and the belief that it is what is needed for the staff to be part of a successful child maintenance operation. We find a lot of good will and commitment to making it work. That is worth stressing.

Q 36

Nia Griffith: I should like to ask two questions. First, if a significant reduction in numbers is required, how do you propose to handle that? Secondly, to what time scale are we working for both the transfer of staff and the training programmes?

Lord McKenzie:   I reinforce what James has said about morale. People in the agency generally are a little bit worried about the future, because it looks uncertain. We have just done a survey, which we do regularly, and apart from that uncertainty, people think that we are going in the right direction. We now help 130,000 more children every month than we did two years ago. People are pleased that we are putting more emphasis on enforcement, taking more action, clearing the unassessed cases and so on. They feel progress. I agree with James that morale is surprisingly but consistently high. The staff tend to be slightly angry that they are held responsible for the lack of tools that they have had, but they are not depressed by it, which is a good thing.
I shall now come on to the numbers. We plan to transfer everybody under TUPE-like terms in July, or shortly after the Royal Assent once CMEC is established as a body corporate. By then, we will have reduced the number of people that we have, because under the Department’s Gershon efficiency target, we have to manage a 15 per cent. reduction by the end of this business year. We are dealing with that largely through natural wastage, supported by some voluntary redundancy programmes, which we will announce shortly. We do not envisage having to make any compulsory redundancies.
As we move into the early years of the commission, we will have the same case load and the same rules for a period. The number of people that we will need will be broadly similar, with perhaps some more to start off and manage the information and support service and to do some of the planning work. Around 2010, we will enter a new phase, in which we start to transition cases. For a while, each case will become two cases, if you like. The existing case will need to be moved to a new assessment, but we will still have debts to manage from the old scheme. During the transition period between 2010 and 2012-13, which is outlined in the papers, we will require similar numbers of people, although we should have made efficiency gains in the interim on the assessment and on the computer system.
When we have largely sorted out the legacy of the past—our debt problems—and we have everyone on the new assessment, we envisage two results. First, we will have a much simpler assessment process. At the moment, about a third of our caseworking resources go into calculating and recalculating the assessment, which we change as people’s net weekly income changes. We will be able to go to one source for most of our assessments and the assessments will last longer, so we should need fewer people for those reasons.
Secondly, because we are making the system voluntary, rather than compulsory, it will not be awash with benefit claimants. At the moment, 250,00 benefit claimants are referred to us each year, of whom only a third become a case. We put work into the rest, which does not benefit anybody in the long term because they have either gone off benefit by the time we get to an assessment, or they made a private arrangement before they came in and are resistant to moving it. For those two reasons, we envisage having fewer people in the longer term,
For those two reasons, we envisage having fewer people in the longer term, and we are talking about some two thirds of the current numbers. Clearly, that is sensitive to how many people use the service and how effective the new enforcement powers are at achieving the outcomes without having to put in more activity—that is, that the powers provide sufficient incentive.
I envisage, given the length of time, that it would be possible to achieve that through similar methods to those that we are using this year—natural wastage and some voluntary redundancy. However, we are talking about a long time in the future, and, again, it would be for the commission rather than for us to make any firm statements.

Q 37

Mark Harper: Sir David Henshaw envisaged that the new system would be significantly different, and that the Government service would deal with a smaller set of more difficult cases. The regulatory impact assessment’s analysis estimates that the number of parents with care would fall from the 1.4 million that use the CSA to about 1 million. One could view that as a significant reduction, but equally one could say that 1 million people were still using the state system. I am not sure that I would say that that was a significant change.
The other question—recognising what Stephen Geraghty just said—relates to the analysis that has been undertaken to get to those numbers. Of the current caseload of 1.5 million cases, 500,000 of those have nil liability. It could be argued that removing those cases with no liability would save some bureaucracy but not really change the amount of money that ends up with families and children. I am trying to understand what assessment you have made of the robustness of the figures, and the extent to which we are moving to a completely different system rather than moving to Child Support Agency version 3.

Stephen Geraghty:   The people who were assessed at nil under the current systems are largely on the original 1993 scheme, under which the threshold at which maintenance was paid was higher. When the assessments were done under that scheme, slightly more than half of the people concerned had a nil assessment, but under the new scheme about 10 per cent. do. Were those 500,000 million people to move on to the new assessment, a lot of them would get money—probably close to 90 per cent. of them would have a positive assessment. It is probably not safe to think that those people would be the ones to move away from the scheme.
Of the current book of assessed cases, about half are private—they are not on benefit and are therefore with the scheme voluntarily. The working assumption is that they will remain with the scheme because they have made a choice and not sought private arrangements, and a similar proportion of the available market—that is the people on benefit—having free choice, will now choose to be with the scheme. That is where the figure of 1 million comes from. Although it would have worked mathematically as Mr. Harper deduced, that is not the basis of the calculation.
How robust is the calculation? That will depend on the reputation of the agency, how successful it is seen to be and whether people make the choice to join. It will also depend on how successful the information support service is in encouraging people, perhaps including some of the current clientele, to make private arrangements. Some research is under way to predict the likely outcome, and I hope that Hilary Reynolds will be able to provide some detail on that.

Hilary Reynolds:   We have done the first extensive survey of separated parents this spring, we will start to receive the emerging results in the back end of this year and we will publish them probably very early next year. I say “separated parents”, because the matter involves not only CSA clients, but others. We are starting to ask how people would prefer to be treated, because the big unknown is what clients and parents will do when they have choice. We have tried to conduct telephone surveys and family research to get our first estimates, refining that through the responses to a fairly large client survey. So far, research suggests that about one quarter of parents with care would prefer to make private arrangements than use a statutory scheme, whereas some 50 per cent. of non-resident parents would prefer to make private arrangements than use a statutory scheme.
We are already starting to get information that enables us to start making an estimate of what might happen, given the demographics and how many people enter separation each year. We are having to do an evolving piece of research.

Q 38

Mark Harper: Picking up Sir David’s point, given that work and the quality of the information, do the Government have a view on the number of separated parents whom they want to use private arrangements rather than a statutory scheme? Do they have any view on that, or will they just let the system settle down and see where it falls?

Lord McKenzie:   Our view is that it should be a matter of choice for the parents involved.

Q 39

Mark Harper: Those choices will depend, to some extent, on the parameters that the Government and the commission set. They will depend on charging, on the effectiveness of the body and on the equality and scope of the information. Although you say that you want it to be a choice, those choices will be guided by policy decisions. Picking up the point made by Dr. Turner, I did not know whether a view would be taken about the fees, for example. The level of the fees, for the non-resident parent and the parent with care, will drive decisions to some extent and the Government will have to have a view about the decisions they want people to make when those fees are set.

Lord McKenzie:   There is no intent from the Government to use those mechanisms to reach a particular target or split of cases. We want to use them to encourage people to make choices that leave them in a position that we and they believe is right. We do not wish to set a target for cases that we want in a statutory system or in voluntary arrangements, and therefore we will not use those mechanisms.

Q 40

Mark Harper: Finally, do the Government share the vision that Sir David Henshaw outlined of the statutory system being aimed primarily at a small number of more difficult cases and the rest of the maintenance arrangements going through private arrangements?

Lord McKenzie:   It is true to say that we do. That relates in part to the point that Mr. Selous made about creating an environment where, when relationships break down, people seek to proceed by agreement over a whole range of issues. That seems to me to be fundamentally good and something that the Government would wish to encourage.

Q 41

Andrew Selous: Professor Nick Wikeley’s memorandum drew the Committee’s attention to this year’s Department for Work and Pensions research report No. 444, which suggests that slightly fewer parents with care are likely to take advantage of the private arrangements. Has that research report altered the findings of the regulatory impact assessment on the number moving over?

Hilary Reynolds:   I cannot say when it came in the timetable, but it is one of the pieces of research that we have considered alongside others.

Andrew Selous: Perhaps you could write a note to the Committee on that point.

Q 42

Albert Owen: Lord McKenzie, you mentioned the benefit disregard. At what level do you plan to set the significant increase in the disregard and on what assumption have you based that decision?

Lord McKenzie:   The level has not been determined yet, as the Secretary of State said on Second Reading. There will have to be negotiations with the Treasury before it is finally determined. Initially, we have done some desk-top research on the impact of various levels of disregard—not only for child maintenance, but for housing benefit and council tax—on work disincentives as well as on the impact on child poverty. Further work has been commissioned and is under way at the moment. That will help to inform us as to where we want to end up on this matter.

Albert Owen: No figures, but your intent is to increase it.

Lord McKenzie:   There is a clear commitment to do so from 2010 in the White Paper.

Q 43

Albert Owen: The disincentive to a lone parent could be considerable if, for instance, there was a full disregard. Does that not negate the Department’s attempts, on the other hand, to encourage people back into work?

Lord McKenzie:   Some of the initial research that has been collated struggled to find a relationship between the level of disregard and work disincentives, and I think that there also have been some studies undertaken overseas, but really we need to do more work and research on that to see how we should proceed.

Albert Owen: The clock is ticking.

Lord McKenzie:   Indeed it is, although they do not all work in the same way. For example, levels of disregard for housing benefit, which are in-work benefits as well, have a potentially different impact on the levels of disregard for child maintenance.

Q 44

Albert Owen: On timetabling, existing benefit claimants are expected to reapply to the new system or to opt for private arrangements in 2008, yet any increase in benefit disregard will not occur until 2011. Why is that, and why not run them together? I presume that that is because you do not have the information.

Lord McKenzie:   In any event, there will be the extension of the £10 disregard to the old scheme cases from 2008, and that will be moved forward. The reason is because we had that further work to do and have further negotiations with the Treasury.

Q 45

Albert Owen: One of the main aims of the Bill is to alleviate child poverty, and the regulatory impact assessment states that a significantly higher disregard would lift approximately an additional 100,000 children out of poverty. I am finding it difficult that you do not have the figures, but how did you come to that conclusion?

Lord McKenzie:   The 100,000 figure is related to more than changes in the disregard. We think that an additional 80,000 children could be lifted out of poverty by having more maintenance arrangements generally, extending the £10 disregard, having more effective enforcement and increasing the flat rate from £5 to £7. We believe that that collection of measures will have a significant impact.
With regard to the impact on child poverty at various levels of disregard, we have answered a number of parliamentary questions and looked at a range of levels. In deriving the 100,000 figure, we have assumed something towards the lower end of that scale, but on a prudent basis.

Q 46

Siân James: I want to turn to the maintenance calculations. Will you outline how you reached the new formula figures on maintenance calculations, which take into account the change from net income to gross income? Do they actually represent the cost of raising a child, and why are the new proportions set out in schedule 4 different from those proposed in the White Paper?

Lord McKenzie:   We sought to align the new rate on gross income so that the outcome mirrored as closely as possible the outcome that someone in the same circumstances would have when entering the system at present. We tried to align those so that broadly the same maintenance obligation would come from those two calculations. The rates are different to those in the White Paper because, frankly, we refined them as we conducted more detailed work on the scale of incomes, on what the outcome would be under the current system and on what rates we needed to apply to ensure that the gross basis had the same outcome.

Q 47

Siân James: Were those simply adjustments that you needed to make at that point?

Lord McKenzie:   Yes, it was simply a case of refining the original figures.

Q 48

Siân James: Why have you maintained an upper earning limit for maintenance calculations?

Lord McKenzie:   Again, I think that that simply carries forward the level that we currently have in the system, but recognises that it is applies to gross income. It is simply to mirror that.

Q 49

Andrew Selous: One of the main problems that the agency faces is the inaccuracy of the assessments, which leads to massive problems for your staff; they tear their hair out, as do parents with care and, no doubt, the non-resident parents, too. Obviously the move to use Her Majesty’s Revenue and Customs data is widely welcomed across the House. Frankly, we should have done that years ago, so it is excellent that it is coming in. Why can we not have that from day one, and why can we not move to using HMRC data as soon as possible? The introduction of that data is rather staggered and set back in the Bill, so why cannot it be fast-tracked and brought forward?

Lord McKenzie:   It will take some time to get the new processes and procedures in place to deal with things such as changes to the IT systems and converting net figures to gross ones. Lots of other changes will be needed at the same time—for example, in relation to the disregard. It cannot be done simply at the flick of a switch. We need to ensure that systems are in place to cope with those changes.

Q 50

Andrew Selous: I do not follow that. The provision of income from Revenue and Customs could presumably be provided today. HMRC must have those data, although perhaps they are stored in several places. The calculations done by the agency are, I accept, a separate matter. However, making arrangements to gain immediate access to accurate information, rather than having to wait for it from a recalcitrant non-resident parent, would surely be better started now?

Lord McKenzie:   The information that we routinely get is gross. The current basis of assessment is net of tax data, which need to come from NRPs generally, as you suggest. If we were to use that gross tax information, we would need to apply the new rates in order to ensure a fair outcome. You cannot just plug in the gross figure and then run the system as we have it at the moment, because you would need to provide for the new rates.

Stephen Geraghty:   There are also different ways of doing the figures. For instance, tax credits are sometimes taken into account now, but will not be in future. As Lord McKenzie said, it is not as straightforward as substituting one data source for another. At the moment, we inquire of the Revenue about income levels when we cannot get the information elsewhere—about 80,000 inquiries were made last year, and HMRC is now our third source of information. Having failed to get an answer from the NRP and the employer, we now go to the Revenue.

Q 51

Andrew Selous: Is the Department generally seized of the need to move as fast as it can, especially with the directions that you are giving your computer software programmers and so on, to make the change happen as quickly as possible?

Lord McKenzie:   Absolutely. Hilary may want to say a little more, but ensuring that the systems are ready to cope with the change is hugely important. We have learned from the past not to do things too quickly and not to try to start before the systems are up and running and properly tested. However, it is a key part of the planning for which Hilary has responsibility.

Hilary Reynolds:   We have learned an awful lot about how not to do things. We are working very closely with the Revenue, because it is not only our systems that have to be ready—its systems have to be ready to give information in a form that we can take. A lot of detailed planning is already going on so that we can make it happen smoothly, so that existing clients do not suffer a discontinuity of service and so that the new arrangements work effectively.

Q 52

Andrew Selous: Are you getting the maximum possible co-operation from HMRC?

Hilary Reynolds:   I am very happy with it.

Andrew Selous: Good.

Q 53

Desmond Turner: The whole assessment formula is based on gross weekly income, which is fine for many; but some people’s incomes vary an awful lot from week to week, especially manual workers on variable rates of overtime and so on. Indeed, many of my constituents in the acting profession go from feast to famine. Against that background, I wonder how you came to select the figure of 25 per cent. to cope with income variation and how you intend to apply it in practice.

Lord McKenzie:   For those whose income varies within the year, we will get annual data. Whatever calculation runs from that, I suppose that individuals will be faced with the same issues that they would have in relation to budgeting generally for household expenses. Those who have no income one week but do the next will, in a sense, have to plan and budget for that.
As for the figure of 25 per cent., we have tried to pitch it that so that significant changes in circumstances can be adjusted in-year, and certainly if someone went from being in work to claiming benefit, or if there were other changes in circumstance, it would derive a change in the calculation. It is trying to set it at a level that will prevent an endless flow of changes of circumstance that gummed up the works in the past. We believe that a 25 per cent. threshold still leaves scope to adjust for significant changes in circumstances, but screens out more modest changes and therefore makes the process more efficient. Using HMRC gross data means that calculations can be updated, in a sense for the first time, on an annual basis. One of the bugbears of the current system is that data, once in, are used endlessly and sometimes never updated. The information will be more current and, therefore, if there has been a dip or an increase in income, it will feed through into a subsequent period’s calculation.

Q 54

Desmond Turner: Will you review annually everyone’s assessment, or will it be triggered by a request to take account of change of income, or what?

Lord McKenzie:   If there is a change of circumstance and, for example, someone says that their income for the year will be less than 25 per cent. of what HMRC data for appreciating periods suggest, it would trigger an adjustment. What it is not proposed to do, and the regulations and the detail on this are still being worked out, is at the end of every year to take stock and to say, “This is the figure we used, this is the figure we ended up with and we are going to adjust it.”

Q 55

Michael Weir: One of the problems that MPs often get at present is with self-employed people. There seems to be a huge difference between what their alleged income is, as given to the CSA, and the lifestyle that the parent with care will say they are enjoying. Do you believe that the provisions in the Bill sufficiently address these issues, particularly with reference to self-employed people?

Lord McKenzie:   We propose that, as for employed people, the assessment for self-employed people will be based on tax data. I suppose that if someone is cheating on their partner they will cheat on HMRC as well. Therefore, we will look to the safeguards in the tax system to support the basis that we use. There will still be a variations arrangement, under which someone who believes that the income reported for the non-resident parent does not properly reflect their lifestyle can seek an adjustment.
One of the things that we are working on is to see whether that variation process can be made more accessible. In the past, it has operated on quite a restrictive basis. We are trying to open that up a bit. Basing these calculations on tax data is a pretty solid footing. What we have also done, and we did this quite recently, was to adjust the result of the Smith case and we fed back capital allowances into the system. That was the right thing to do.

Q 56

Michael Weir: But then again, self-employed people are very good at reducing their income through accountants and such like for tax purposes. If there is a variation with child support, will there be a knock-on effect, with HMRC looking again at self-employed people’s tax returns?

Lord McKenzie:   If CMEC became aware of information that suggested someone’s tax data were not correct, there would be obligations to deal with that.

Q 57

Michael Weir: From what you are saying, it does not seem that there will be a great departure from the present system, under which you can already go to the CSA and say, “I do not think this income is correct.” My experience, 99 times out of 100, is that the CSA does not look at it properly, it takes for ever or it tries to get information from the other parent, which never comes. It just goes on and on and on. Even getting HMRC data, I do not see a great difference in this. It still seems that there will be a problem with self-employed people.

Lord McKenzie:   It is that variations process which we are looking to revamp, to see whether we can ensure that it leads to changes, where they are appropriate, and is not as restrictive as it is at the moment. There is still work going on on that.
I would hang on to the point that using tax data is as solid a foundation as we can have. If we did not use that, what would we use? CMEC would have to make its calculation of what somebody’s earnings are, what data it should use and whether they are any different from those supplied by HMRC, which I doubt. We would complicate the system. A key thrust of the changes is to simplify it and make it more effective.

Mr. Plaskitt:   I think that you might also bear in mind some of the new enforcement powers that we are planning to take as a result of the Bill. There are some measures in it that will cause self-employed, non-resident parents to think much harder before considering not complying with their obligations. For example, there are the current account deduction orders and the referral of information to credit reference agencies, which can have quite a tough effect on someone who is self-employed and depends on credit lines. Put those alongside what we are saying about having more robust sources of information about income to start with, and add that to the tougher enforcement powers, and I think that the regime for self-employed NRPs will be much more robust than at present.

Q 58

Michael Weir: I accept what you are saying, but it still does not get round the problem of assessing what someone’s actual income is at the first stage. I appreciate what Lord McKenzie says—it is very difficult to do so, and HMRC is possibly the best that we can get. But I still foresee the problem that we have at present continuing under the new system—the difference between lifestyle and declared income.

Hilary Reynolds:   About 7 per cent. of the current case load of the CSA is self-employed cases, and they are by and large the more complex cases. That is the nature of the income. We have tried to design the system for the majority of our cases—a key design principle for us has been trying to make a simpler system for both clients and staff, to give a better outcome to clients and children. The self-employed will continue to be one of the more difficult areas for us to take account of, but we are trying to avoid designing for every single conceivable eventuality in the Bill.

Q 59

Michael Weir: I appreciate that, but it seems that you are saying that the cases that are difficult now will continue to be difficult in the future.

Hilary Reynolds:   And we have a couple more powers, a better date, better information on income and better enforcement powers. Those are the things that we have added in.

Stephen Geraghty:   I think that from the agency perspective, your point is absolutely right. When we get a challenge from the parent with care, who says, “Well, he earns more than that really”, we go to the Revenue and get an assessment. If that is consistent, that is as far as we can go. If somebody has evidence, rather than saying, “Well, I think it’s wrong,” we can take it further. Of course, the parent with care can appeal against the assessment, but you are absolutely right in saying that, if the assessment basis is the tax details, which are what we currently go to as an arbitrator between the two views, we are in a similar position and the onus will still be on the parent with care to provide proof, if he or she has any. I agree with Lord McKenzie that for the agency now or CMEC in the future to set up a rival income-assessing machine to the Revenue and Customs would not be a good use of taxpayers’ money or the right thing to do. Whether the Revenue should use it more as an investigation trigger is something that we could discuss with it.

Christopher Chope: We need to move on, because otherwise we will find ourselves running out of time.

Q 60

Siân James: Just quickly, on the transfer of cases to the new system, I am concerned because I know of a number of fathers who are still trapped in the original system and have never quite made it over to the interim system. They are now facing a third system. Are you convinced that you have sufficient resources vis-Ã -vis personnel and so on to make the successful step into the third system—the son-of-son-of the CSE?

Lord McKenzie:   The answer to that is that we believe we have, but the measure of the task is reflected in the fact that we are looking to make that transition over a three-year period. Some have said that we should seek to do it earlier but, as Hilary said, we have learned some lessons from the past. The journey for somebody on the original system will be that when section 6 goes, they will have a choice whether to stay in, but there will not be an opportunity to transfer to the current system. There will be an opportunity to transfer to the new system during the process of transferring cases between 2010 and 2013. By March 2013, we will have one system, one basis of assessment and one client case load on that system. If they wish to stay in the system in the interim, it will be on the old basis.

Q 61

Siân James: My problem is that more and more people are choosing to go to the ombudsman about the CSA, and I envisage another group of people being unhappy, dissatisfied and left behind. I want to avoid that at all costs.

Lord McKenzie:   Indeed. Originally we said that we would transfer people to the current system when it was fit for purpose. It has emerged that it is not, and therefore it would be crazy to do that. We are looking at a three-year transition period to ensure that the new system can deliver for people. I accept that that leaves a number of years in which there are still difficulties, and in which people will feel aggrieved because they are trapped in the old system. Their only route out is to go out of the system altogether, but that will not necessarily be right for everybody.

Q 62

Siân James: Given that people will be making their own private arrangements and the particular difficulties and challenges of that, which we have heard about, will there be sufficient personnel and resources to deal with the particular problems of those people?

Lord McKenzie:   Do you mean—

Siân James: Private arrangements.

Lord McKenzie:   Yes, the information and support service must be robust enough to cater for the volume of cases that we will have. There are going to be particular challenges around the point at which section 6 compulsion goes. It will be a key part of planning for the service to ensure that those people who wish to exit the system are properly supported at that point.

Q 63

Andrew Selous: On the enforceability of private voluntary agreements, the move to CMEC is, as I understand it, predicated on a reduction in the number of people coming to the organisation, because you hope that they will form their own voluntary agreements. There is general support for that, but is it not the case that people will form voluntary agreements only when they think that they are worth the paper they are written on in terms of being enforceable? Would you, as CMEC, not be helping yourselves if people were able to call on the enforcement powers of CMEC to ensure that an appropriate voluntary agreement was enforced? This seems to be a key issue. We touched on it earlier with the Scottish minutes of agreement issue, but it is much bigger than that and is definitely a UK-wide issue.
I get the sense from the Department—from what the Secretary of State said on Second Reading—that you do not want to have anything to do with enforcing private agreements. You see that as more work, and you are trying to shed work. I make the counter-claim that CMEC’s having some role in ensuring that appropriate voluntary agreements are enforced would help to achieve your objectives. What do you say to that?

Lord McKenzie:   We are not planning for CMEC to be involved in enforcing private agreements. The protection for people who enter private voluntary agreements is that if they break down, they have access to CMEC, or currently the CSA. That is the safety net. Going down the path of CMEC enforcing the range of different agreements that people will enter into to suit their circumstances, which may be formalised in a range of different ways, would be an administrative nightmare at the least.
We are trying to achieve circumstances in which two parties who have had a breakdown in their relationship can try to enter into agreements voluntarily. If the starting point is, “If this doesn’t work, we want to sue,” it will peel away the ethos of what we are trying to create. We are right not to seek to enforce private agreements.

Q 64

Andrew Selous: If I were a vulnerable parent with care who wanted not to become embroiled with CMEC, but to do what you are encouraging me to do and hope I will do, would I not need some reassurance that the voluntary agreement that I entered into would be honoured?

Lord McKenzie:   The assurance is that if it breaks down, there is access to the statutory system. You know what it will deliver and that it can be enforced. That will be people’s protection and assurance.

Q 65

Mark Harper: To pick up on the point about voluntary agreements, you have made it clear that you do not see a role for their enforcement, so what about monitoring and recording their existence, given that the Bill’s objective is to maximise maintenance arrangements for the whole marketplace? If you do not know how many separated families have maintenance arrangements in place, and you know only about those with which CMEC is dealing, do you really have any idea about whether the legislation’s objective is being reached?

Lord McKenzie:   There has been a debate about whether there should be a register of voluntary or private agreements, and there are arguments on both sides. We want CMEC to take a view on it in due course, and it may wish to test it out at some stage. However, it is not necessarily very easy, because there will be a range of different voluntary agreements, and CMEC will be charged with ensuring that they are current and robust. There are a range of issues surrounding that. We do not preclude the register, but we leave it to CMEC to take a view on it in due course.

Q 66

Mark Harper: In that case, though, how do you have any way of knowing whether the commission is achieving its main objective? You will have some data collection, and it cannot just be the cases that use the statutory process, because to some extent, the most important cases are those that do not use it. Not that I am one to increase burdens, but unless you have some data-gathering and some way of knowing what is going on, you have no way of knowing whether it is successful.

Lord McKenzie:   There is a whole range of data: the family resources survey, the family children’s survey and the household survey.

Mark Harper: Rather than trying to track the agreements.

Lord McKenzie:   Yes.

Q 67

Michael Weir: May I take it from what Lord McKenzie says that there will not be a prescriptive agreement? For example, in the Scottish system, you can enter a minute of agreement, record it in the books of counsel in session and have it enforced by sheriff officers. Will that continue after CMEC is set up?

Lord McKenzie:   Absolutely. Minutes of agreement will certainly continue. We envisage that the information and support service would provide a standard agreement for people to use if they wished. Obviously we will not force anybody to use the agreement. Consent orders in England will continue, too.

Hilary Reynolds:   It is worth noting that when we have talked to some clients about what they find important in a voluntary agreement, sometimes it is not regular payments, but lump sums, mortgage or school uniform payments, or whatever. What suits the parents of the child or children will be a variety of things, not just the standard x amount per period.

Q 68

Albert Owen: Is it your intention to use the deduction from earnings orders on existing arrangements as well as new ones—even when the arrangements are working perfectly well?

Lord McKenzie:   At the moment, it is used only as the first administrative stage of enforcement. The proposal is to test whether we should use it as the basic method of collection. The idea is that there will be a pilot to see how it works.

Q 69

Albert Owen: How would you select pilot cases?

Lord McKenzie:   We envisage that people who already exist in the system and pay in by other means would not be included in that pilot. At the end of the day, the pilot will need to be evaluated. There are issues there for employers, particularly small employers, with whom there is current engagement. We need to test it, and to evaluate the cases where we would, for good reason, see people outside of those arrangements, if that is the basis on which we move forward.

Q 70

Albert Owen: That answers that point very conclusively. The Bill includes a provision that the orders should not be used where there is good reason not to. Can you give some examples?

Lord McKenzie:   There might be an issue of privacy around a certain arrangement, so I concede that that might be one of the issues. However, we need to see what happens in the pilot and what other issues are thrown up by that.

Stephen Geraghty:   Half of the employers’ case load is on deduction of earnings now. We have 75,000 new ones a year, and 140,000 people who hand them in. However, we do not get them until they have been non-compliant for a while, although every other country uses it as a standard—it is like paying one’s tax and national insurance. In Australia, the US and New Zealand it is the first way of collecting it. Here, there is a stigma because it shows that people have been non-compliant. If it were universal, there would be no stigma any more. From an operational point of view, it would be a great help, although I understand the Government’s position that it should be piloted first.

Q 71

Albert Owen: Does that not contradict what Lord McKenzie is saying—that we must be sensitive and have pilot schemes?

Stephen Geraghty:   It explains why that would help the commission. It does not necessarily say that it works. That is why we are going to pilot it first and see how it works.

Q 72

Albert Owen: Different cultures in the country?

Stephen Geraghty:   Perhaps.

Q 73

Nadine Dorries: I want to return to something that you mentioned a moment ago, which probably links to the question that I want to ask. I want to talk about the record of accuracy in calculations. You touched on that, and on the voluntary agreements. However, something that you said about the voluntary agreements concerned me. You talked about the client surveys, and how you were asking people what suits them: whether it was the mortgage payments, or a payment directly to a child. However, there is no specific monitoring of that. It immediately occurred to me that a voluntary agreement might be entered into, part of which is that the mortgage payment is covered, but if it is not, and the parent defaults on those payments, that leaves the parent who is caring for the children in a very vulnerable position. Do you not think that if people are entering into those voluntary agreements, and allowing parents to take on voluntary responsibilities which would have such immense consequences, it is appropriate for such provision to be voluntary, and not obligatory?
Secondly, I have a number of cases where there have been inaccurate calculations of the amount that the father was due to pay or receive. That causes all MPs a huge amount of problems and work, as well as distress to parents. What will happen to ensure that we no longer have that huge margin of discrepancy? It has been a shambles. The record of accuracy in calculating payments is poor. I wish to highlight the accuracy in calculating payments, and the vulnerability of a parent with children who is in a voluntary arrangement with somebody else paying the mortgage.

Hilary Reynolds:   I was simply trying to share some of the ways in which parents have made voluntary agreements that suit their circumstances and those of their children. The interest that we have as a policy, and which CMEC will have as a statutory objective, is to maximise the maintenance arrangements that are in place and working. However, people will interpret their provision of that maintenance through different sources, and that may vary according to the different parents. It is not about us saying, “Thou shalt pay mortgages instead of an up-front sum,” which is what some people have suggested might suit their circumstances.

Q 74

Nadine Dorries: I understand that, but personal circumstances change. A couple on one day may think that it is appropriate and suitable, for example, for the absent father to pay the mortgage on a house lived in by the mother and two children; that may be suitable on day one. However, six months later he may default on that and the relationship may have broken down further. The agreement may not be as harmonious any longer. Should there not be some kind of monitoring to ensure that the voluntary agreement is adhered to?

Hilary Reynolds:   There will be an information support service, and the statutory scheme will be there at all times to act as what I think Peter Hain called an escape route. There will be negotiation in the shadow of a maintenance and enforcement commission.

Lord McKenzie:   In terms of the inaccurate calculations, Stephen may want to comment further but I think it is right to say that there have been significant improvements under the operational improvement plan, which is only just through its first of three years. Under the new basis of assessment, fewer bits of information are needed to make the calculation. The key bit of information, which is the income, will in most cases come from Her Majesty’s Revenue and Customs. It will not be necessary to rely on the non-resident parent to do the calculation. That will greatly assist with accuracy also.

Stephen Geraghty:   Accuracy is clearly important, but sometimes we make too much of it. We measure accuracy to a penny. Our new assessments, on the last decision, are currently about 80 per cent. accurate to a penny. That includes procedural things. For instance, with the much quoted 65 per cent. of liability orders that were inaccurate, the sample consisted of 54 cases, 11 of which involved a mathematical problem so that they were a penny or more out. Most of the other problems were such things as taking too many days to pass on the file, or not taking legal follow-up action to get missing information. The accuracy statistics include procedural matters.
That is not to say that accuracy is not important. For the enforcement work that we are now doing we have just done a very big sample. An external auditor did 700 cases and we did 42,000 internally before we passed them on to debt collectors. The accuracy to a penny is more than 90 per cent. People have a chance to appeal to us and then to a social security and child support appeals tribunal if they think that the assessment is inaccurate. Mechanisms are there. I am not minimising the problems; I would like 100 per cent. accuracy and procedural adherence, but the monetary amounts of inaccuracy are relatively small.

Q 75

Nadine Dorries: You said in your opening statement that too much could be made of accuracy, but that does not apply to a parent who is not receiving the correct payments.

Stephen Geraghty:   It might be threepence short but they get it; or it might be accurate to a penny, but not enforceable because it is a penny out—

Q 76

Nadine Dorries: I assure you that none of the cases that I deal with is accurate to a penny; I deal with cases that are thousands of pounds out, so there are serious margins as well as narrow ones.
I understand what you say about the three-year improvement plan, which is 12 months in, because I served on a Statutory Instrument Committee six months ago when the issue was discussed. I understand that improvements are being made, and am happy to agree with that. However, we are going into another new system. Most of the inaccuracies of the previous system came about in the initial set-up and rolling out, and we are just beginning to put the problems right, 12 months into a three-year improvement plan; what guarantees are there that we will not incur problems with the new system? It is great that there is 90 per cent. accuracy, but that is now, with a system that you know, which has been operational for years and has been assessed, and which has an improvement plan. We are now going straight into a new system. Are we in danger of falling through the same trapdoors as before?

Q 77

James Plaskitt: The first formula that the CSA launched with in the 1990s required more than 90 different bits of information to achieve an assessment. We are moving now to a system that requires three core pieces of information. That is the best guarantee that we have a chance now to achieve far higher accuracy.

Lord McKenzie:   To be fair, we are not moving straight into it. We are going to use the time to 2010 to make sure that we can do what you rightly ask for, and make sure that we are fit to run the new system.

Stephen Geraghty:   Two big causes of numerical rather than procedural inaccuracy are the effective dates—the date on which a change should take effect—and the definition of income, which might involve asking whether we should have averaged five or six weeks’ overtime to get the amount. One of those will go with the revenue source data. Effective dates may still be an issue. Clearly there is a role for training, checking and system checking to minimise the problem that we have.

Q 78

Mark Harper: I have a quick point. In our questioning we have talked about the use of the quite rightly tougher enforcement powers. Given that those powers are available much earlier than the new assessment systems, will they be used looking very carefully at the assessments that have been made? Tougher enforcement is very good, but not if we are trying to toughly enforce an incorrect assessment. We need to link the accuracy of the assessment to the enforcement powers; otherwise, a number of cases will be made much of in which those powers, which are rightly available, are being used when the assessment is wrong. That will not get the new commission off to a good start.

Lord McKenzie:   I agree absolutely. It is absolutely right that we do what you say and ensure that the assessment is right before we use the enforcement powers. The challenge has been that in the past the CSA has not used the powers that it has, but I think that that is changing under the operational improvement plan. Part of the reason that it is changing is that not only are more resources being deployed in enforcement, but there is improved accuracy on assessments.

Stephen Geraghty:   Even before we transfer the debt to a debt collector, we rework the case and produce a breakdown of the account, which is available to the non-resident parent to challenge. Sometimes, people will view an inaccurate assessment as one that we should have recalculated because there was other information. For the privacy of the non-resident parent we do not always give the parent with care the full reasons that an assessment has changed, and there can be quite a big change if new information comes to light. But of the liability orders that we go for in the magistrates court, less than 1 per cent. are turned down. There is a fair degree of comfort in that.

Christopher Chope: Do you want to raise a quick question about passports?

Q 79

Mark Harper: I do. Very quickly, on the enforcement powers, clause 25, on disqualification for holding or obtaining travel authorisation, allows the commission itself to make an order. Under clause 28, which talks about disqualification for holding or obtaining a driving licence, the commission has to seek a court order. Why the difference? Furthermore, given that “travel authorisation” means also identity cards—I do not wish to rehearse the arguments about those—and that the Government’s vision is that, at some point, ID cards will have a role beyond travel and allow access to other public services, is the ability to disqualify someone from holding an ID card limited to the travel nature of that card, or will it include access to other public services?

Mr. Plaskitt:   We feel that there is a difference between those two sanctions—the driving licence and the travel document—which is why we have pursued different routes. Let us take the driving licence first. We feel that the consequences of withdrawing a driving licence are markedly and quantitively different from those that could follow on from the removal of travel documentation. For example, if we take away a driving licence but the person still drives, there are implications for insurance and any third party that might then be involved—let us say that there is an accident or injury on the road. Because it has a much wider circle of ramifications, it is appropriate to pursue an order through the courts. Travel documentation, however, requires rather more discretionary activity with no potential third party impact. It is a decision on whether a non-resident parent goes on holiday.

Q 80

Mark Harper: What about if it is connected to their employment, and the withdrawal of their travel authorisation affects, either partly or severely, the ability of the non-resident parent to earn a living and, therefore, to provide for their family? Many people nowadays, as part of their employment, are required to travel internationally. If you do that and the consequence is that the person loses their job or has a significantly reduced level of income, you will affect the family. If those are the consequences, is it appropriate that the agency can do that, or should it seek a court order?

Mr. Plaskitt:   The biggest effect on the family is the non-payment of maintenance. That is why the sanctions are there. People need to think about the consequences of incurring one of those sanctions. If it is likely that it could jeopardise their employment, it should actually underline the sanction. That is that way that I would look at it.

Mark Harper: And they would have a right of appeal?

Mr. Plaskitt:   On all of it, yes.

Lord McKenzie:   There is also a specific provision in the Bill that says: “Before making an order under this section against a person, the Commission shall consider whether the person needs a travel authorisation in order to earn a living.” So there is a specific need to address that issue.

Christopher Chope: Where?

Lord McKenzie:   Under clause 25(4) of the Bill.

Q 81

Michael Weir: The Bill includes provisions for the write-off of historic debt in some instances. In many cases that go back years, parents with care have been trying to get money from other parents without great success, and large sums have drawn up. There is provision for part-payment of arrears to be accepted in full settlement. Will the parent with care be involved in discussions about whether that would proceed?

Lord McKenzie:   Absolutely. The provisions are particularly focused on situations where there was an interim maintenance assessment because it was difficult to get data, and often the suggestion is that the arrears are inflated over what the liability ought to be. But it is clear that we would only write off where we had the consent of the parent with care, and only when the commission recommended to the parent with care that it might be appropriate. So any inappropriate offers would be screened out by the commission, and only in those circumstances and specifically with the consent of the parent with care would the debt be written off.

Michael Weir: So, only with consent?

Lord McKenzie:   Indeed.

Q 82

Michael Weir: Would any compensation be offered to the parent with care in those circumstances?

Lord McKenzie:   No. The obligation to pay is on the non-resident parent, so it is not appropriate for there to be compensation in those circumstances.

Q 83

Michael Weir: Do you have any idea of the amount that you are seeking to write off? Will you, for example, try to get rid of all historic debt when the new agency is set up by coming to arrangements in those circumstances?

Lord McKenzie:   We would like as many of those old debts to be cleared as possible. Obviously, that is quite resource-intensive, and Stephen may wish to comment on that. One of things that it is proposed we do is, rather than write off debt, create a provision for reflecting the effect of inflated or uncollectible debt in the account. However, those debts would remain in being and would not be written off until there is consent from the parent with care.

Q 84

Michael Weir: Will you look at the old cases to determine how many of them are inflated? I appreciate the point about the interim assessments, but most of those arose because the absent parent refused to deliver the information, so they were used specifically as a sanction in the first instance. There is some concern that by effectively running around the agency for years, the absent parent will get a reward by the writing off of what was originally supposed to be a sanction. How will you look at that issue, as there may be some cases where people simply have not paid for many years?

Lord McKenzie:   Perhaps Stephen can answer more specifically about the programme that is being considered to address that, but I understand that the total case load will be looked at and worked through systematically to see which old debts can be cleared on that basis. You are right, in the sense that we should only support the writing off of debt where it has consent and where it is reasonable.

Stephen Geraghty:   The approach that we are taking at the moment—and some of this is fairly technical—is that we do sometimes broker deals between the parent with care and the non-resident parent. For instance, in two recent cases we assigned an Army pension from the non-resident parent to the parent with care, which will clear the debt over a period. However, the debt stays on our books.
In another case, the non-resident parent transferred his interest in a property to the parent with care, but, again, the debt will stay on our books. There are cases now in which we broker deals that we need to be able to tidy up in some way. There are also cases—usually where a solicitor or a pair of solicitors is involved—where those concerned will come to an agreement that there will be a payment, and we will not take active steps to pursue the balance. We have some cases like that now where both parents are happy, but the cases need tidying up.
We have taken each of the cases that are above certain thresholds and allocated them to people to pursue, to look at whether the debt can be reworked and whether it is accurate, and to take whatever recovery action is appropriate. There comes a point in any debt collection exercise where it is a question of how much we can get. I think that we are a long way from that, but presumably the commission and Parliament will, at some point, want to consider whether they want to keep the debts going. Debts owed by parents who have died are still on the books, which is clearly absurd. It is a question of the commission putting proportionate effort into collecting as much debt as it can while there is still some benefit to be had—hopefully for the children, but at least for the parent with care.

Q 85

Michael Weir: Given what Lord McKenzie said, it seems to me that there is potential for slight conflict on this issue. We are going to write off debt only where the parent with care agrees to it, but you are effectively saying that some debt will have to be written off anyway.

Stephen Geraghty:   We are not going to get anywhere with collecting some debt. The choice is between leaving that as debt that everybody knows will not be collected, or writing it off. Experience says that most parents with care will—

Michael Weir: Take anything they can get at some stage.

Stephen Geraghty:   Take a reasonable sum.

Lord McKenzie:   There will be instances in which the non-resident parent has died and the money cannot be obtained from the estate. In those circumstances, you would write it off without the need for the consent of the parent in care.

Q 86

Andrew Selous: Would not parents in care who are worried about this issue be more reassured if clause 2 included the collection of debt as a primary objective of the commission? Why is it not there as one of CMEC’s objectives?

Lord McKenzie:   One of the key objectives is to ensure that maintenance arrangements are effective.

Hilary Reynolds:   And to secure compliance, which includes debt dating back to 1993.

Q 87

Andrew Selous: So your interpretation of clause 2 of the Bill is that it relates to the collection of historical debt?

Hilary Reynolds:   Yes.

Q 88

Michael Weir: There is also provision in the Bill for the transfer of arrears to private sector debt collection. Have you researched the likely impact on vulnerable low-income families of factoring historical debt to such agencies?

Lord McKenzie:   It is an interesting question. We thought long and hard about retaining that power in the Bill. It relates to the possibility of selling debts, to see whether more money can be raised that way. I think that we know that the private sector would have an interest in the debt book, although it would possibly be fairly limited. We also know that it would be interested in what one might term the low-hanging fruit—the debt that is easier to collect. In any event, that would probably need liability orders attached for the private sector to take an interest. The private sector would not necessarily have the range of enforcement powers that CMEC will have.
We saw that there were pretty limited, if any, circumstances, in which the power would be used, but we thought that, on balance, it was right to retain it so that it would be available if market circumstances changed. If some debt is taking an inordinate time to collect, there might be circumstances in which the parent would prefer some cash immediately. We do not foresee an early and robust use of that provision, however. The power is clinging on in the Bill because we think that it might be of some use in the future.

Q 89

Andrew Selous: I should like to move on to computer use by CMEC. The Public Accounts Committee report published the day after Second Reading accused the Department of not maintaining the capability of an intelligent IT customer. Could I have the name of the senior responsible owner for the CMEC IT project? Will you give an assurance that whoever that is will be in post the whole way through the implementation of the IT that will be necessary to make CMEC successful?

Hilary Reynolds:   CMEC does not exist yet, so it does not have any employees or directors. That is what the Bill will bring in. The Department has responsibility for the contracts for the current IT systems of which the CSA systems are part. We are working with the Department and with the CSA to look at the IT systems and strategy that we believe CMEC will need, so that the new board is in the best possible position to understand what it is inheriting. I cannot give you a name.

Q 90

Andrew Selous: Okay. I want to be brief, because we need time for part 4 of the Bill. Will you give me an assurance that, when CMEC is up and running, one person—for whom the Public Accounts Committee term is “senior responsible owner”—will be nominated and will be in post for the length of the project, and not moved to another Department every two years because they have done well? Such movement is the reason why we have had a catalogue of IT failures across the whole of government. We must start learning lessons from what has gone wrong in the past, and I would have thought that the Department would be keen to learn those lessons, so that this is successful. I would like some reassurance on that point.

Lord McKenzie:   I am not sure whether I can give you a specific reassurance in those terms; that is a matter for CMEC. Clearly, ensuring that the IT systems are fit for purpose, robust, up to date and deliver what they should is a central part of CMEC’s work. I do not see how it could possibly be otherwise.

Christopher Chope: That brings us on to part 4.

Q 91

Sarah McCarthy-Fry: Mesothelioma is a dreadful disease. Portsmouth, my constituency, is one of the hot spots for it. The target six-week period for getting money to people will be absolutely crucial. Looking back, we can see that in other Departments, there is no history of having to get money to people within six weeks. Where will you get the resources from, and how do you know that you will have sufficient resources to be able to deliver that tight time scale?

Hilary Reynolds:   We think that the costs that the Department has set aside are sufficient to meet the needs of the process. My Department processes quite a lot of things in six weeks, so we believe that the resources are in place, both in skill and money.

Sarah McCarthy-Fry: You are already there?

Hilary Reynolds:   We will be there.

Q 92

Sarah McCarthy-Fry: You will be there. Okay, I shall move on to the next question. There is an assumption that you will be able to recover the money from insurers and employees. What happens if you do not, and what effect will that have on your financial projections? Could it mean that you would have to reduce the awards that were made?

Hilary Reynolds:   The recovery assumptions in the regulatory impact assessment use existing data on compensation payments and industrial injury benefit payments, so we believe that they are reasonably robust. The RIA gives indicative payment levels for a cost-neutral scheme. If recoveries are lower than predicted, payments might be lower; if recoveries are higher, payments could be higher, so we have taken a central estimate.

Q 93

Sarah McCarthy-Fry: So it depends on how the money comes through. What monitoring will you do over the next few years and do you have monitoring plans in place?

Hilary Reynolds:   I would expect us to have monitoring plans in place to see what happens, and to have close interaction with the insurance industry, among others.

Q 94

Sarah McCarthy-Fry: The delegated powers memorandum states that there will be a significant change, and major changes and modification to the Amendment of Social Security (Recovery of Benefits) Act 1997 because it is a significantly different form of recovery. That is all a bit vague. Do you have any more detail?

Hilary Reynolds:   I think that what this is about is the impact on employers’ liability insurance premiums. We expect that the impact on employer liability insurance premiums will be a cost of around £10 million a year. That should be set in the context of the overall market for employers’ liability insurance of around £1 billion. While the cost is £10 million, that is a small amount in the overall context. If you want further information, I can offer a note if that would be helpful.

Sarah McCarthy-Fry: A note would be helpful, but I would just like to get my head around this. Surely, their liability is no different from what it was before.

Hilary Reynolds:   No, which is why the impact is fairly small.

Sarah McCarthy-Fry: It is just that the state will be able to recover it back.

Hilary Reynolds:   Yes.

Sarah McCarthy-Fry: I see. A note would be useful; we may need to read a bit more on that.

Q 95

Paul Rowen: Moving on to the retrospective impact, will the compensation recovery process apply only to relevant civil compensation claims that settle after the date that the section in question comes into effect?

Hilary Reynolds:   Yes. It is our intention that the recovery process will apply to civil compensation claims that settle after the date.

Q 96

Paul Rowen: What happens to the payments that are made?

Hilary Reynolds:   We have been working with insurers—

Paul Rowen: So, you have a clear system in operation and you know the number of clients that will be affected?

Hilary Reynolds:  I believe so, yes.

Q 97

Paul Rowen: What about the circumstances in which the amounts will be paid? You say that the amounts will vary. Can you tell us what sort of amounts, and what the circumstances will be that will determine those amounts?

Hilary Reynolds:   The Pneumoconiosis etc. (Workers’ Compensation) Act 1979 payments vary according to the age of the claimant at diagnosis. We expect that to be a differentiating factor. The payments also vary according to the claimant and the dependent who is claiming. We envisage that to be one of the provisions that vary.

Q 98

Paul Rowen: Will the system not take account of their individual circumstances? You mentioned dependents, but there may be other circumstances.

Hilary Reynolds: There may be other circumstances, but that might be suitable for debate later in Committee.

Q 99

Paul Rowen: Could you give us some information? Again, I think that that is quite important.
The final question is whom the provision might apply to. The Bill talks about people in the UK. However, if someone was working on the docks in Gibraltar, or any British naval dockyard not in the United Kingdom, would that affect payment?

Hilary Reynolds:   The intention of the power is to ensure that people who have a connection with the UK, either through their employment or because they live near an asbestos plant, are covered, and to avoid the equivalent of benefit tourists—if I am allowed to use that phrase. They are people with no connection to the UK who travel here to gain a lump sum. People working in the dockyards in Gibraltar would be covered because it is a UK establishment.

Q 100

Paul Rowen: Would that include Gibraltarians?

Hilary Reynolds:   We might need to go into more detail later. It is people who have a connection with the UK. We are not trying to exclude citizens of particular countries.

Paul Rowen: It is a dependent territory. There could be somebody working for a British company there who contracts the disease.

Hilary Reynolds:   They might indeed.

Paul Rowen: Would they be eligible for payment?

Hilary Reynolds:   The aim is to get to those sufferers and dependents who, as a result of this exposure, get this bowel disease. We are particularly interested in the views of the Committee and other interested parties on how we can achieve this policy intent in particular.

Q 101

Paul Rowen: What about retrospectively? If you go back in time, when we had many more colonies, you may have many more eligible people.

Hilary Reynolds:   That is a point that we probably need to come back to.

Q 102

Andrew Selous: I have two very brief questions. I have some constituents who seem to be stuck for ever between their former employer and insurance company, and I cannot get either to move at any speed to take the issue forward. Has there been any thinking on such issues?
I want also to raise the issue of pleural plaques, on which there is an early-day motion signed by a number of Members. I recognise that this is not as serious a medical condition as mesothelioma, but it is distressing and causes anxiety. Could the Minister or anyone present tell us what view the Department takes on pleural plaques?

Hilary Reynolds: I cannot answer that question, and I will not even pretend that I can.

Mr. Plaskitt:   I will try. My understanding of pleural plaques is that it can have a variety of contributing causes. It is not a narrowly defined disease which is solely the result of exposure to asbestos. Pleural plaques can arise for reasons other than asbestos. That is why there is a separate approach.

Q 103

Andrew Selous: What about the length of time that cases can be stuck between employers and insurance companies? In some cases, constituents are compensated quite quickly. Perhaps they had a smarter lawyer or the employer was feeling a bit more generous that day, but in more serious cases, there seems to be no cut-off period.

Lord McKenzie:   Could you drop us a note with the specifics on that? It is best that we look at it on that basis and revert.

Christopher Chope: May I thank the witnesses for helping the Committee with its deliberations? I also thank the Committee members for their assiduous work during the morning. The room will be locked from 1 o’clock onwards, so if people wish, they can leave their papers here.

It being One o’clock, The Chairmanadjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at Four o’clock.